Dry weather stressing corn, soybeans

FFAGENTS

June 15, 2012|By Ray Grabanski, Special to the Farm Forum

Dry weather is now stressing corn and soybeans in the central corn belt, especially in Iowa, Illinois, Indiana, Ohio, and Missouri where crop conditions have declines due to a lack of recent rainfall and the depletion of topsoil moisture levels there the past few weeks. Crop progress reports Monday showed the stress is affecting corn and soybeans, but wheat so far is faring much better (especially winter wheat).

The USDA crop progress numbers were bullish corn and soybeans, as the condition rating indicates a rapidly deteriorating crop last week with corn down 6% in G/E to only 66%. This indicates a rapidly deteriorating yield potential, with Pro Ag yield models declining almost 4 bu/acre to 158 bu/acre, well below current USDA projections of 166 bu/acre. However, better than expected rains across Iowa, Ill., Mo., Ky, and Tenn. as well as lighter rain in OH early this week should boost those ratings as of today. The rain is even more critical to entice wheat producers to double crop soybeans after harvesting a bumper winter wheat crop.

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Soybean crop conditions also declined significantly, down 5% to only 60% rated G/E. The Pro Ag yield model also declined to 42.54 in an early yield model result (still some years there was no rating this early), well below USDA's 43.9 bu/acre. Both the corn and soybean yield model is suggesting a rapidly deteriorating crop, but the rains yesterday will help soybeans perhaps more than corn (not only helping germinating seedlings but also causing more double crop wheat acres to be planted to soybeans after the 2-3 week early wheat crop is harvested).

Winter wheat crop conditions, however, are another matter as winter wheat crop ratings actually IMPROVED 1% to 53% G/E, at a time when conditions are usually declining due to the "browning off" effect. Instead, the yield model for winter wheat keeps rising, this time to a new record shattering 48.7 bu/acre, well above USDA's current 47.6 bu/acre estimate. USDA then surprised Pro Ag with a reduction in winter wheat yield projections in the June report Tuesday, dropping winter wheat production to 1.684 billion bushels. That made little sense to Pro Ag other than the Kansas yield probably declined last month due to dryness as well.

Irregardless of all the noise out there, we have been in a dry weather pattern for the central corn belt, with the forecast remaining dry for now. What we really need is a good gully washer in the central corn belt now, one that will wash away the dry soil fears and drought worries as we get closer to pollination of corn. We are entering mid-June with a lack of topsoil moisture to get us some insurance against a lack of rain during this period, so it is becoming critical that rain starts to fall fast in the central corn belt. Problem is the forecast for the next 10 days, while providing generous rains for the western corn belt (including Iowa, Minn., and the Dakotas), holds little hope for significant rain in the central eastern corn belt (especially Ill., Ind., Ohio, Mo., and Ky./Tenn.). These areas will likely suffer further stress, and that will be difficult for the market to digest without going higher in the coming few days.

Of course, the weather forecast does get updated 2x/day, and so there is still a chance that the on-again, off-again rainfall will be put back into the forecast again.

One thing Pro Ag does want to note: Demand is waning for export markets, as signified by the reduction in corn export demand in the world. We seem to finally be at a point where the production of grain has improved worldwide to meet the strong demand of late, and that seems to be lowering the demand for grains from the rest of the world. Perhaps this is the most bearish factor as we move into the critical late June/early July development phase of grains. We still need a big rain, though, before markets will break as crop stress is apparent on much of the central corn belt.